BUSINESSES have a more optimistic outlook this year on the back of the renewed consumer demand and return of normalcy after the pandemic, according to the latest Business Expectations Survey by the Bangko Sentral ng Pilipinas (BSP).
The overall confidence index (CI) rose sharply to 34 percent in the first quarter this year from 23.9 percent in the fourth quarter in 2022.
“For the first quarter of 2023, the more upbeat outlook of respondents was attributed to expectations of higher consumer demand for products and services; full reopening of the economy and return to pre-pandemic normalcy as more Covid-19 restrictions are lifted; increased business activities and sustained economic recovery; and expansion and new business opportunities in healthcare, manufacturing and construction sub-sectors,” the BSP said.
The BSP surveyed 1,554 firms nationwide from Jan. 13 to March 6, 2023.
The central bank noted that similar to the Philippines, the business outlook in the country’s top trading partners, such as China, the euro area and Hong Kong, was more optimistic in the first quarter.
Meanwhile, the business sentiment turned optimistic in Australia, Thailand and Vietnam, was less pessimistic in Taiwan and the United States of America but more pessimistic in South Korea.
Second quarter outlook
Moreover, the business sentiment for the second quarter of 2023 turned more optimistic as the overall confidence index increased to 49 percent from 31.3 percent a quarter ago.
Companies expect better business conditions like higher volume of sales (such as food and beverages, electronic parts, computers and laptops, paint, garments, airline tickets and loan products); improved business activities and operations; and seasonal uptick in demand over the summer months.
Local firms expect this rosy outlook to continue over the 12 months with overall CI significantly increased to 61.9 percent from previous quarter’s survey result of 46.2 percent.
The optimism is anchored on higher demand/sales; a fully reopened economy; better business conditions; and new business opportunities.
Regional outlook
Business outlook in some regions in the country, including Central Visayas, was optimistic for the first quarter.
“The anticipated increase in sales of consumer products and demand for education and tourism services were some of the factors that buoyed firms’ sentiment of higher spending that will spur business activity,” the survey result said.
CIs of Bicol, Western Visayas and Zamboanga were less positive while that of Soccsksargen turned negative.
“The outlook of firms in said regions was tempered by high inflation and interest rates, unfavorable business conditions, and supply shortages of consumer goods,” the survey revealed.
Sector’s optimism
Business outlook in industry, construction, services and wholesale and retail trade sectors were optimistic in the first quarter.
The construction firms’ heightened optimism was due to their anticipation of new projects amid the full reopening of the economy, lifting of pandemic-related restrictions and good weather conditions which bode well to construction activities.
The more favorable business sentiment of respondent firms in the services sector was mainly due to their expectations of sustained economic growth and strong demand in the tourism, banking and education sub-sectors.
Moreover, the more upbeat outlook in the first quarter of firms in the industry and wholesale and retail trade sectors was attributed to higher sales projection as the country’s post-pandemic recovery gains further traction.
Similarly for the second quarter, the outlook across all sectors turned more upbeat as the CIs rose. Firms across all sectors were optimistic on the expected increase of sales volume as post-pandemic recovery continues.
Inflation, employment, forex
Furthermore, businesses from the services, industry and trade sectors expect inflation to be moderate and interest rates to decline in the second quarter.
Meanwhile, businesses in the industry and services sector also cited the usual uptick in demand during the summer season and good harvest as reasons for their more favorable business sentiment for the next quarter.
The survey also revealed that the employment outlook index declined to 13.4 percent for the second quarter, which means hiring intentions may turn less favorable.
Conversely, employment prospects for the next 12 months are expected to improve as the employment outlook index increased to 36.4 percent from 29 percent in the previous quarter’s survey results.
Moreover, the percentage of businesses in the industry sector with expansion plans declined marginally to 19.1 percent for the second quarter from 19.5 percent in the fourth quarter 2022 survey results.
Businesses identified stiff domestic competition (52.6 percent of respondents), insufficient demand (33 percent) and high interest rate (29 percent) as among the key challenges that business owners are facing.
For the first and second quarters of 2023 and the next 12 months, businesses expect the peso to appreciate against the US dollar and peso borrowing and inflation rates to rise.
They also expect inflation during the quarters to average at seven percent and foreign exchange conversion to average at P55.4/US$1 for the first and second quarters and P55.3/$1 for the next 12 months.